Harley-Davidson, Inc. (HOG) - Shares in Harley-Davidson roared to life during the month of June, rising some 20.0% since June 13. Bullish players expecting the price of the underlying to continue to accelerate to the upside scooped up call options this morning. HOG’s shares are currently up 1.75% on the day to stand at $41.69 as of 11:35 am ET. Call options in the front month are the most heavily trafficked, with the July $43 strike call attracting the greatest volume. Investors exchanged more than 4,100 calls at the July $43 strike against previously existing open interest of just 33 contracts. It looks like traders purchased most of the calls at that strike for an average premium of $0.36 a-pop. Call buyers profit if shares in the motorcycle manufacturer climb another 4.0% over the current price of $41.69 to surpass the average breakeven point at $43.36 by July expiration. Harley-Davidson’s shares traded within pennies of the breakeven price back in April when the stock rallied to a two-year high of $43.15. The July contract calls expire four days before HOG reports second-quarter earnings. In-the-money calls set to expire in August received some attention, as well. It looks like some 2,100 calls may have been purchased for an average premium of $2.74 each at the August $40 strike. The calls changing hands at this strike could be closing positions as open interest at this strike is sufficient to cover volume generated thus far in the session. The rise in demand for HOG calls helped lift options implied volatility on the stock 7.4% to 32.23% by 11:50 am in New York.
Visa, Inc. (V) – The run-up in Visa’s shares sparked by the Fed’s decision to impose a $0.22 cap on swipe fees rather than the $0.10 limit originally proposed may be far from over according to some options market participants taking bullish stances on the global payments technology company today. Shares in Visa rose 5.5% to a new 52-week high of $88.93 today, bringing the stock’s total gains for the week to more than 20.0%. Fresh bullish positioning in weekly options expiring next Friday suggests shares may continue to hit new highs in the near term. It looks like traders scooped up some 1,000 calls at the July ’08 $90 strike for an average premium of $0.40 each. Call buyers at this strike profit at expiration if shares in Visa rally another 1.65% over today’s high of $88.93 to surpass the average breakeven price of $90.40. One strategist appears to have enacted a three-legged bullish play on Visa to reduce the premium required to position for upside potential in the underlying shares. The investor likely purchased the 1,500-lot July $87.5/$90 call spread and sold 1,500 puts at the July $80 strike, all for a net cost of $0.33 in premium per contract. The financing provided by selling the higher strike calls and the deep out-of-the-money puts significantly lowered the price at which Visa’s shares must trade in order for the position to become profitable. Profits are available to the trader if shares exceed the average breakeven price of $87.83 at expiration this month. Maximum potential profits of $2.17 per contract pad the investor’s wallet in the event that Visa’s shares exceed $90.00 at expiration day. A number of analysts at various firms raised share price targets on Visa and other payments services companies this week. Visa’s overall reading of options implied volatility stands 10.5% higher this afternoon at 28.39% as of 1:15 pm on the East Coast.
Carter’s, Inc. (CRI) – The largest U.S. branded marketer of apparel exclusively for babies and young children popped up on our scanners at the start of the session due to heavier than usual put activity in the September contract. Shares in the owner of OshKosh B’Gosh rose 1.55% to $31.24 in the first half of the session, but it looks like one option strategist is bracing for the price of the underlying to pull back ahead of expiration at the start of the school year. The trader appears to have initiated a bear put spread, buying 1,850 puts at the September $30 strike for a premium of $1.85 each, and selling the same number of calls at the lower September $25 strike at a premium of $0.40 apiece. Net premium paid to initiate the spread amounts to $1.45 per contract, thus positioning the put player to profit should CRI’s shares drop 8.6% to trade below $28.55 at September expiration. Maximum potential profits of $3.55 per contract are available to the trader should shares plunge 20.0% in the next three months to trade below $25.00 at expiration day. Carter’s is scheduled to report second-quarter earnings ahead of the opening bell on July 28. Last week Carter’s, Inc. announced it agreed to purchase Canadian children’s apparel company Bonnie Togs in a deal valued around $98 million.
Alpha Natural Resources, Inc.(ANR) – Shares in coal producer Alpha Natural Resources may rally substantially in the final half of 2011 according to one or more options traders populating December contract calls this morning. Shares in ANR currently trade 1.45% higher on the session at $46.10 as of 12:25 pm ET. It looks like investors employed debit call spreads, buying roughly 6,000 calls at the December $55 strike for an average premium of $1.86 each, and selling around the same number of calls up at the December $65 strike at an average premium of $0.50 apiece. The net cost of the bullish play amounts to an average premium of $1.36 per contract. Shares in the coal mining company must surge 22.3% in the next six months in order for investors to break even at a price of $56.36 by December expiration day. Call spreaders could rake in maximum potential profits of $8.64 per contract in the event that ANR’s shares jump 41.0% over the current price of $46.10 to exceed $65.00 at expiration. Shares in the coal company last traded above $65.00 back in January. Alpha Natural Resources reports second-quarter earnings ahead of the open on August 4.